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Studies show China's overall cost advantage is shrinking
http://news.yahoo.com/s/ap/20100708/ap_on_bi_ge/as_china_cheap_no_more
By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer – Thu Jul 8, 12:57 pm ET
SHANGHAI – Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor. A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad. Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West. "China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers. "I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins. In an about-face mocked on "The Daily Show with Jon Stewart," Wham-O, the company that created the Hula-Hoop and Slip 'n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.
At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries. "Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper," said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.
That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S.
"If costs go up by half, it's about the same price as in the U.S. And you don't have 30 days on the water in shipping," he says.
Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking. Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. Land, water, energy and shipping costs are on the rise.
In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania. Mexico, in particular, has gained an edge thanks to the North American Free Trade Agreement and fast, inexpensive trucking, says Mike Romeri, an executive with Emptoris, the consulting firm.
Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China. So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.
That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages. Foxconn refused repeated requests for comment on plans to move much of its manufacturing capacity to central China's impoverished Henan province, where a local government website has advertised for tens of thousands of workers on its behalf. But among other projects farther inland, Foxconn is teaming up with some of the biggest global computer makers to build what may be the world's largest laptop production hub in Chongqing, a western China city of 32 million where labor costs are estimated to be 20 to 40 percent lower than in coastal cities.
Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy. But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative. "The new game is to find a way to do the domestic market," says Goodwin.
Many factories in Foshan, another city in Guangdong that saw strikes at auto parts plants supplying Japan's Honda, have left in the past few months, mostly moving inland to Henan, Hunan and Jiangxi, said Lin Liyuan, dean at the privately run Institute of Territorial Economics in Guangzhou. Massive investments in roads, railways and other infrastructure are reducing the isolation of the inland cities, part of a decade-old "Develop the West" strategy aimed at shrinking the huge, politically volatile gap in wealth between city dwellers and the country's 600 million farmers.
Gambling that the unrest will not spill over from foreign-owned factories, China's leaders are using the chance to push investment in regions that have lagged the country's industrial boom. They have little choice. Many of today's factory workers have higher ambitions than their parents, who generally saved their earnings from assembling toys and television sets for retirement in their rural hometowns. They are also choosier about wages and working conditions. "The conflicts are challenging the current set-up of low-wage, low-tech manufacturing, and may catalyze the transformation of China's industrial sector," said Yu Hai, a sociology professor at Shanghai's Fudan University.
___
Associated Press researcher Ji Chen contributed to this report.
London gives go-ahead for city-wide Wi-Fi
The Cloud, Europe’s largest Wi-Fi operator, is planning to build a London-wide Wi-Fi network in time for the Olympic Games in the city in 2012. According to a Financial Times report today, a decision is set to be made as early as September, which could see the firm begin rolling out the network next year. Last week, London’s mayor, Boris Johnson, promised that London would get blanket Wi-Fi coverage in time for the games and has reportedly asked The Cloud to draw up a blueprint. Johnson has been meeting with Wi-Fi operators and major UK mobile firms such as Vodafone, O2 and Virgin Mobile to consider how the industry can respond to the expected surge in mobile Internet during the Games. “It’s getting through that the only way to [enable] large-scale data downloading with credibility is with Wi-Fi,” said Steve Nicholson, The Cloud’s CEO. The firm already runs a network in the City of London supporting O2’s network and has seen demand rise dramatically as smartphones encourage data download. UK regulator Ofcom has previously published proposals outlining how it plans to release more radio spectrum for the 2012 Olympics Games in order to cope with “unprecedented” demand.
According to the report, The Cloud has more than 12,000 contracted international network locations and more than 20,000 Wi-Fi network access points in 11 European countries. The UK-based group is backed by a series of private equity firms, including Ferd Venture, the Norwegian investor, Encore Ventures, Accel and Provider Venture Partners, the Swedish fund. However, Nicholson told the Financial Times that more funding would be necessary to complete the London project.
Samsung’s first bada phone goes on sale in Europe
I tested the phone at MWC in Barcelona in February - very slow OS and UI, single-touch-only display, more or less a bad iPhone clone. Sorry Samsung ... and your app store is no better ...
Samsung has launched its new ‘Wave’ smartphone – the first to run its new proprietary mobile operating system, bada – in Europe today. The device (pictured) will launch initially in the UK, France and Germany with Vodafone announced as the UK distributor. Further launches are set to follow in Southeast Asia, China, the Middle East and Africa, and Latin America. First unveiled at the GSMA Mobile World Congress in February, Wave boasts a Super AMOLED touchscreen and a 1GHz processor. “This launch will make our platform vision a reality and consumers, developers and operators will experience the freedom of choice that bada enables,” commented JK Shin, the president of Samsung’s mobile unit. Launching simultaneously with Wave will be a software portal called Samsung Apps, which is set to become available in 80 countries around the world offering users access to premium content and applications. Samsung also announced that the first version of the bada software developer kit (1.0.0) was soon to emerge from beta mode. In the UK, the Wave smartphone will be available from Vodafone for free on a £25 per month two-year contract. Customers signing up to the tariff will get 300 free minutes of calls, unlimited texts, and a 500MB data allowance each month.
Last month, Samsung said that smartphones based on bada would amount to one-third of its total smartphone offerings this year. However, analysts believe the vendor will have a tough time attracting developers to a proprietary platform in the face of huge competition from open-source rivals Android and Symbian, as well as established ‘closed-shops’ such as Apple’s iPhone OS. Although it is the world’s number two mobile phone vendor with around 20 percent market share, Samsung has struggled in the high-end smartphone space and is attempting to treble its smartphone shipments in 2010 (to around 18 million) by expanding its portfolio.
Next Gen iPhone and Ethics in China
Advice to all companies dealing with China: assume there is no way you can keep a secret, well, secret. Thanks Foxconn !
[Original post from Engadget (different topic)]
By Ross Miller posted May 23rd 2010 at 11:14AM
Clearly a white front plate was not enough to satisfy curiosity. Though we aren't able to verify this ourselves, Chinese site Apple.pro has a couple shots of what it claims to be the white next-gen iPhone, almost fully assembled (the front plate looks like it hasn't been snapped in all the way) and casually lounging next to the black model we've gazed upon so many times at this point. Is this enough for us to trust and comfortably change our palette preferences? Nah, but surely 15 days until expected confirmation can't be too excruciating of a wait.
Latin America fuels growth at Telefonica
Spain’s Telefonica has reported rising profits and revenue for the first quarter due to growth in its Latin American markets, which helped offset problems at home. Net profit was up 2 percent year-on-year to EUR1.66 billion, while revenues grew 1.7 percent to EUR13.9 billion. However, analysts were disappointed at the slight growth and the firm’s shares were down 1.6 percent in mid-morning trade on the Madrid stock exchange. “The numbers are somewhat weak,” said Madrid-based broker Banesto Bolsa in a note to investors, reports the Financial Times. Latin American revenues outperformed the rest of the group, rising 4 percent despite the effects of a recent currency devaluation in Venezuela. But revenues in Spain, where high unemployment and consumer uncertainty have hit demand, dropped nearly 4 percent from the year-ago period.
Telefonica is currently attempting to take control of its Brazilian mobile joint venture, Vivo, in order to merge it with its struggling local fixed-line arm, Telesp. Its partner in the mobile unit – Portugal Telecom - rejected an unsolicited EUR5.7 billion (US$7.65 billion) bid for its stake earlier this week. The Financial Times reported yesterday that Telefonica's CFO Santiago Fernandez Valbuena said the firm has no plans to raise its offer. Brazil accounted for 16.5 percent of group revenues in the first quarter, although year-on-year growth was almost flat due to currency factors and operational problems at Telesp.
HTC sues Apple over alleged patent abuse
Smartphone vendor HTC has filed a complaint with the US International Trade Commission (ITC) alleging that Apple has infringed five of its patents and called for a ban on the import and sale of Apple’s iPhones, iPads and iPods made outside the US. “We are taking this action against Apple to protect our intellectual property, our industry partners, and most importantly our customers that use HTC phones,” said Jason Mackenzie, HTC’s vice-president for North America, in a statement.
The latest move is the Taiwanese vendor's attempt to countersue Apple. Earlier this year, Apple launched its own legal assault against HTC claiming the HTC-manufactured Nexus One smartphone (based on Google’s Android platform) has violated patents related to the iPhone. “We can sit by and watch competitors steal our patented inventions, or we can do something about it,” said Apple’s Steve Jobs at the time. “We think competition is healthy, but competitors should create their own original technology, not steal ours.” Apple is also embroiled in a similar spat with Nokia.
A Financial Times report notes that the lawsuits are likely to increase tension between Apple and Google as they fight for market share in the smartphone market. Figures this week from the NPD Group claim that Google’s Android platform overtook Apple to become the second-largest smartphone OS in the US in the first quarter. “This is an inevitable outcome of the iPhone versus Android competitive dynamics,” said Jeffrey Hammond, a mobile analyst at Forrester Research. However, he predicted that the parties would ultimately need to come to a settlement. “It’s difficult to see how they’re not going to have to cross-license patents for them to all to survive,” he added.
iPhone 3G lines start at the Apple Cube... one week early
I could not resist this one from Engadget ... Last Year, for the first iPhone, I queued 8 hours, then was in and out of the store within minutes - activated my iPhone at home, transfered my number, contacts, pics and music in less than 20 mins ... Now I wonder how long it's going to take me for the 3G model ... Apparently we need to get into the store (ATT or Apple) and get the activation process done there. And god know how long this will take ...
Close encounters of the third kind
It’s really interesting to see that we have been talking about mobile tv since the end of the 90s and yet, nothing significantly impressive in terms of revenue has emerged … except for more than 10 million people in Asia/Middle East/Africa where TV on a phone has become a standard feature thanks to new technology from a silicon valley company that brings the same tv as in your home to your cell phone.
China brings one-legged mobile TV standard to Olympics
Well yes duh – we see a lot of silicon companies who recently announced they are delivering chips for the new China CMMB market, however, looks like the satellites are not going to be launched anytime soon – so, looks like the market is not going to materialize anytime soon either. Not always good to be the first to market …
£31,000 for mobile TV download
This one totally dwarfs my $3000 iphone bill of last year … But it also shows how data roaming (and roaming overal for that matters) is so last century – when are we going to get global coverage voice+data for one affordable price …
My First iBill: $1800
Got an iPhone ? if you iTravel then prepare for an iSurprise ...
Check this - $1800 is my first iBill, it's a 10 times increase from my phone bill in July ... so what happened ? Well, how about you figure out, I am posting my bill online ....
So, what's the next killer app on mobile phones ?
Clearly, #1 is voice. Then we've had pictures. That's #2 (if we pass on the ringtone era) What's next ? We are not talking about the 20 million units/quarter or so multimedia smartphones here, but rather the 700 million units/year so-called "feature phones" ... So here is what we have
1. Music and movies (stuck in DRM and channel issues for several years)
2. Digital mobile tv (requires specific and/or 3G cellular networks)
3. Analog mobile tv (cheapo and free-to-air, but short term)
4. Location Based Services, aka LBS (requires GPS)
The cool thing about music and movies is that you can consume even if a network is out of reach, i.e. no connectivity. Handy in particular when in the middle of nowhere (might not happen often these days) or in a plane (that's really my business traveller argument). Mobile TV requires a network (99% of the world is analog) but news, sports and favorite tv shows for free anywhere ? wow now that's cool. But looks like carriers want us to pay for digital mobile tv ... not sure we're ready ... and GPS needs to solve the RFI problems ...
So what do you think ???
Philippe at Telegent Systems
I have recently joined Telegent Systems, a silicon valley company that does mobile tv silicon. I am doing business development here, I think I will soon post updates on my website (www.philippemora.com) and linkedin (http://www.linkedin.com/in/philippemora).
It's very interesting to see that eventhough 99% of television in the world is still analog, but when we mention Mobile TV, we immediately think about digital mobile TV, in particular the Digital Video Broadcast networks ...
So what is new ? I think it would be interesting to focus on understanding what drives customers to viewing a movie, or anything that's audio-visual for that matters, on a very small screen ... It's now not really unusual to see people watching movies on their ipods during long-haul international flights, something I was not seing even two years ago when aPpLe lauched the feature (yeah others had done that before however none sold $1 million in movies the first week.
So now, how long is it going to take to have the mainstream actually *pay* for several interactive TV channels on a phone - which is what all the DVB flavors promise ... Obviously, when this happens, everybody in the food chain will be most happy. I bet for 2010 at the earliest ...
Brilliant: SJ asks to abolish DRM
From Steve Jobs, http://www.apple.com/hotnews/thoughtsonmusic/
Steve Jobs
February 6, 2007
With the stunning global success of Apple’s iPod music player and iTunes online music store, some have called for Apple to “open” the digital rights management (DRM) system that Apple uses to protect its music against theft, so that music purchased from iTunes can be played on digital devices purchased from other companies, and protected music purchased from other online music stores can play on iPods. Let’s examine the current situation and how we got here, then look at three possible alternatives for the future.
To begin, it is useful to remember that all iPods play music that is free of any DRM and encoded in “open” licensable formats such as MP3 and AAC. iPod users can and do acquire their music from many sources, including CDs they own. Music on CDs can be easily imported into the freely-downloadable iTunes jukebox software which runs on both Macs and Windows PCs, and is automatically encoded into the open AAC or MP3 formats without any DRM. This music can be played on iPods or any other music players that play these open formats.
The rub comes from the music Apple sells on its online iTunes Store. Since Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the “big four” music companies: Universal, Sony BMG, Warner and EMI. These four companies control the distribution of over 70% of the world’s music. When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods. Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services. However, a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.
To prevent illegal copies, DRM systems must allow only authorized devices to play the protected music. If a copy of a DRM protected song is posted on the Internet, it should not be able to play on a downloader’s computer or portable music device. To achieve this, a DRM system employs secrets. There is no theory of protecting content other than keeping secrets. In other words, even if one uses the most sophisticated cryptographic locks to protect the actual music, one must still “hide” the keys which unlock the music on the user’s computer or portable music player. No one has ever implemented a DRM system that does not depend on such secrets for its operation.
The problem, of course, is that there are many smart people in the world, some with a lot of time on their hands, who love to discover such secrets and publish a way for everyone to get free (and stolen) music. They are often successful in doing just that, so any company trying to protect content using a DRM must frequently update it with new and harder to discover secrets. It is a cat-and-mouse game. Apple’s DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.
With this background, let’s now explore three different alternatives for the future.
The first alternative is to continue on the current course, with each manufacturer competing freely with their own “top to bottom” proprietary systems for selling, playing and protecting music. It is a very competitive market, with major global companies making large investments to develop new music players and online music stores. Apple, Microsoft and Sony all compete with proprietary systems. Music purchased from Microsoft’s Zune store will only play on Zune players; music purchased from Sony’s Connect store will only play on Sony’s players; and music purchased from Apple’s iTunes store will only play on iPods. This is the current state of affairs in the industry, and customers are being well served with a continuing stream of innovative products and a wide variety of choices.
Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company’s music store. Is this true? Let’s look at the data for iPods and the iTunes store – they are the industry’s most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. It’s hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.
The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company’s players and music stores. On the surface, this seems like a good idea since it might offer customers increased choice now and in the future. And Apple might benefit by charging a small licensing fee for its FairPlay DRM. However, when we look a bit deeper, problems begin to emerge. The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.
An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies. Perhaps this same conclusion contributed to Microsoft’s recent decision to switch their emphasis from an “open” model of licensing their DRM to others to a “closed” model of offering a proprietary music store, proprietary jukebox software and proprietary players.
The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.
Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.
In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.
So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies.
Much of the concern over DRM systems has arisen in European countries. Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free. For Europeans, two and a half of the big four music companies are located right in their backyard. The largest, Universal, is 100% owned by Vivendi, a French company. EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company. Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.
http://news.yahoo.com/s/ap/20100708/ap_on_bi_ge/as_china_cheap_no_more
By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer – Thu Jul 8, 12:57 pm ET
SHANGHAI – Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world's factory floor. A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China's low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad. Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West. "China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall," said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers. "I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it's going to get ugly," said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
Beijing's decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins. In an about-face mocked on "The Daily Show with Jon Stewart," Wham-O, the company that created the Hula-Hoop and Slip 'n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.
At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries. "Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper," said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.
That may soon become true for publishers, too. Printing a 9-by-9-inch, 334-page hardcover book in China costs about 44 to 45 cents now, with another 3 cents for shipping, says Goodwin. The same book costs 65 to 68 cents to make in the U.S.
"If costs go up by half, it's about the same price as in the U.S. And you don't have 30 days on the water in shipping," he says.
Even with recent increases, wages for Chinese workers are still a fraction of those for Americans. But studies do show China's overall cost advantage is shrinking. Labor costs have been climbing about 15 percent a year since a 2008 labor contract law that made workers more aware of their rights. Tax preferences for foreign companies ended in 2007. Land, water, energy and shipping costs are on the rise.
In its most recent survey, issued in February, restructuring firm Alix Partners found that overall China was more expensive than Mexico, India, Vietnam, Russia and Romania. Mexico, in particular, has gained an edge thanks to the North American Free Trade Agreement and fast, inexpensive trucking, says Mike Romeri, an executive with Emptoris, the consulting firm.
Makers of toys and trinkets, Christmas trees and cheap shoes already have folded by the thousands or moved away, some to Vietnam, Indonesia or Cambodia. But those countries lack the huge work force, infrastructure and markets China can offer, and most face the same labor issues as China. So far, the biggest impact appears to be in and around Shenzhen, a former fishing village in Guangdong province, bordering Hong Kong, that is home to thousands of export manufacturers.
That includes Taiwan-based Foxconn Technology, a supplier of iPhones and iPads to Apple Inc. Foxconn responded to a spate of suicides at its 400,000-worker Shenzhen complex with pay hikes that more than doubled basic monthly worker salaries to $290. Strike-stricken suppliers to Honda Motor Co. and Toyota Motor Corp., among many others, also have hiked wages. Foxconn refused repeated requests for comment on plans to move much of its manufacturing capacity to central China's impoverished Henan province, where a local government website has advertised for tens of thousands of workers on its behalf. But among other projects farther inland, Foxconn is teaming up with some of the biggest global computer makers to build what may be the world's largest laptop production hub in Chongqing, a western China city of 32 million where labor costs are estimated to be 20 to 40 percent lower than in coastal cities.
Given the intricate supply chains and logistics systems that have helped make southern China an export manufacturing powerhouse, such changes won't be easy. But for manufacturers looking to boost sales inside fast-growing China, shifting production to the inland areas where many migrant workers come from, and costs are lower, offers the most realistic alternative. "The new game is to find a way to do the domestic market," says Goodwin.
Many factories in Foshan, another city in Guangdong that saw strikes at auto parts plants supplying Japan's Honda, have left in the past few months, mostly moving inland to Henan, Hunan and Jiangxi, said Lin Liyuan, dean at the privately run Institute of Territorial Economics in Guangzhou. Massive investments in roads, railways and other infrastructure are reducing the isolation of the inland cities, part of a decade-old "Develop the West" strategy aimed at shrinking the huge, politically volatile gap in wealth between city dwellers and the country's 600 million farmers.
Gambling that the unrest will not spill over from foreign-owned factories, China's leaders are using the chance to push investment in regions that have lagged the country's industrial boom. They have little choice. Many of today's factory workers have higher ambitions than their parents, who generally saved their earnings from assembling toys and television sets for retirement in their rural hometowns. They are also choosier about wages and working conditions. "The conflicts are challenging the current set-up of low-wage, low-tech manufacturing, and may catalyze the transformation of China's industrial sector," said Yu Hai, a sociology professor at Shanghai's Fudan University.
___
Associated Press researcher Ji Chen contributed to this report.
London gives go-ahead for city-wide Wi-Fi
The Cloud, Europe’s largest Wi-Fi operator, is planning to build a London-wide Wi-Fi network in time for the Olympic Games in the city in 2012. According to a Financial Times report today, a decision is set to be made as early as September, which could see the firm begin rolling out the network next year. Last week, London’s mayor, Boris Johnson, promised that London would get blanket Wi-Fi coverage in time for the games and has reportedly asked The Cloud to draw up a blueprint. Johnson has been meeting with Wi-Fi operators and major UK mobile firms such as Vodafone, O2 and Virgin Mobile to consider how the industry can respond to the expected surge in mobile Internet during the Games. “It’s getting through that the only way to [enable] large-scale data downloading with credibility is with Wi-Fi,” said Steve Nicholson, The Cloud’s CEO. The firm already runs a network in the City of London supporting O2’s network and has seen demand rise dramatically as smartphones encourage data download. UK regulator Ofcom has previously published proposals outlining how it plans to release more radio spectrum for the 2012 Olympics Games in order to cope with “unprecedented” demand.
According to the report, The Cloud has more than 12,000 contracted international network locations and more than 20,000 Wi-Fi network access points in 11 European countries. The UK-based group is backed by a series of private equity firms, including Ferd Venture, the Norwegian investor, Encore Ventures, Accel and Provider Venture Partners, the Swedish fund. However, Nicholson told the Financial Times that more funding would be necessary to complete the London project.
Samsung’s first bada phone goes on sale in Europe
I tested the phone at MWC in Barcelona in February - very slow OS and UI, single-touch-only display, more or less a bad iPhone clone. Sorry Samsung ... and your app store is no better ...
Samsung has launched its new ‘Wave’ smartphone – the first to run its new proprietary mobile operating system, bada – in Europe today. The device (pictured) will launch initially in the UK, France and Germany with Vodafone announced as the UK distributor. Further launches are set to follow in Southeast Asia, China, the Middle East and Africa, and Latin America. First unveiled at the GSMA Mobile World Congress in February, Wave boasts a Super AMOLED touchscreen and a 1GHz processor. “This launch will make our platform vision a reality and consumers, developers and operators will experience the freedom of choice that bada enables,” commented JK Shin, the president of Samsung’s mobile unit. Launching simultaneously with Wave will be a software portal called Samsung Apps, which is set to become available in 80 countries around the world offering users access to premium content and applications. Samsung also announced that the first version of the bada software developer kit (1.0.0) was soon to emerge from beta mode. In the UK, the Wave smartphone will be available from Vodafone for free on a £25 per month two-year contract. Customers signing up to the tariff will get 300 free minutes of calls, unlimited texts, and a 500MB data allowance each month.
Last month, Samsung said that smartphones based on bada would amount to one-third of its total smartphone offerings this year. However, analysts believe the vendor will have a tough time attracting developers to a proprietary platform in the face of huge competition from open-source rivals Android and Symbian, as well as established ‘closed-shops’ such as Apple’s iPhone OS. Although it is the world’s number two mobile phone vendor with around 20 percent market share, Samsung has struggled in the high-end smartphone space and is attempting to treble its smartphone shipments in 2010 (to around 18 million) by expanding its portfolio.
Next Gen iPhone and Ethics in China
Advice to all companies dealing with China: assume there is no way you can keep a secret, well, secret. Thanks Foxconn !
[Original post from Engadget (different topic)]
By Ross Miller posted May 23rd 2010 at 11:14AM
Clearly a white front plate was not enough to satisfy curiosity. Though we aren't able to verify this ourselves, Chinese site Apple.pro has a couple shots of what it claims to be the white next-gen iPhone, almost fully assembled (the front plate looks like it hasn't been snapped in all the way) and casually lounging next to the black model we've gazed upon so many times at this point. Is this enough for us to trust and comfortably change our palette preferences? Nah, but surely 15 days until expected confirmation can't be too excruciating of a wait.
Latin America fuels growth at Telefonica
Spain’s Telefonica has reported rising profits and revenue for the first quarter due to growth in its Latin American markets, which helped offset problems at home. Net profit was up 2 percent year-on-year to EUR1.66 billion, while revenues grew 1.7 percent to EUR13.9 billion. However, analysts were disappointed at the slight growth and the firm’s shares were down 1.6 percent in mid-morning trade on the Madrid stock exchange. “The numbers are somewhat weak,” said Madrid-based broker Banesto Bolsa in a note to investors, reports the Financial Times. Latin American revenues outperformed the rest of the group, rising 4 percent despite the effects of a recent currency devaluation in Venezuela. But revenues in Spain, where high unemployment and consumer uncertainty have hit demand, dropped nearly 4 percent from the year-ago period.
Telefonica is currently attempting to take control of its Brazilian mobile joint venture, Vivo, in order to merge it with its struggling local fixed-line arm, Telesp. Its partner in the mobile unit – Portugal Telecom - rejected an unsolicited EUR5.7 billion (US$7.65 billion) bid for its stake earlier this week. The Financial Times reported yesterday that Telefonica's CFO Santiago Fernandez Valbuena said the firm has no plans to raise its offer. Brazil accounted for 16.5 percent of group revenues in the first quarter, although year-on-year growth was almost flat due to currency factors and operational problems at Telesp.
HTC sues Apple over alleged patent abuse
Smartphone vendor HTC has filed a complaint with the US International Trade Commission (ITC) alleging that Apple has infringed five of its patents and called for a ban on the import and sale of Apple’s iPhones, iPads and iPods made outside the US. “We are taking this action against Apple to protect our intellectual property, our industry partners, and most importantly our customers that use HTC phones,” said Jason Mackenzie, HTC’s vice-president for North America, in a statement.
The latest move is the Taiwanese vendor's attempt to countersue Apple. Earlier this year, Apple launched its own legal assault against HTC claiming the HTC-manufactured Nexus One smartphone (based on Google’s Android platform) has violated patents related to the iPhone. “We can sit by and watch competitors steal our patented inventions, or we can do something about it,” said Apple’s Steve Jobs at the time. “We think competition is healthy, but competitors should create their own original technology, not steal ours.” Apple is also embroiled in a similar spat with Nokia.
A Financial Times report notes that the lawsuits are likely to increase tension between Apple and Google as they fight for market share in the smartphone market. Figures this week from the NPD Group claim that Google’s Android platform overtook Apple to become the second-largest smartphone OS in the US in the first quarter. “This is an inevitable outcome of the iPhone versus Android competitive dynamics,” said Jeffrey Hammond, a mobile analyst at Forrester Research. However, he predicted that the parties would ultimately need to come to a settlement. “It’s difficult to see how they’re not going to have to cross-license patents for them to all to survive,” he added.
iPhone 3G lines start at the Apple Cube... one week early
I could not resist this one from Engadget ... Last Year, for the first iPhone, I queued 8 hours, then was in and out of the store within minutes - activated my iPhone at home, transfered my number, contacts, pics and music in less than 20 mins ... Now I wonder how long it's going to take me for the 3G model ... Apparently we need to get into the store (ATT or Apple) and get the activation process done there. And god know how long this will take ...
Close encounters of the third kind
It’s really interesting to see that we have been talking about mobile tv since the end of the 90s and yet, nothing significantly impressive in terms of revenue has emerged … except for more than 10 million people in Asia/Middle East/Africa where TV on a phone has become a standard feature thanks to new technology from a silicon valley company that brings the same tv as in your home to your cell phone.
China brings one-legged mobile TV standard to Olympics
Well yes duh – we see a lot of silicon companies who recently announced they are delivering chips for the new China CMMB market, however, looks like the satellites are not going to be launched anytime soon – so, looks like the market is not going to materialize anytime soon either. Not always good to be the first to market …
£31,000 for mobile TV download
This one totally dwarfs my $3000 iphone bill of last year … But it also shows how data roaming (and roaming overal for that matters) is so last century – when are we going to get global coverage voice+data for one affordable price …
My First iBill: $1800
Got an iPhone ? if you iTravel then prepare for an iSurprise ...
Check this - $1800 is my first iBill, it's a 10 times increase from my phone bill in July ... so what happened ? Well, how about you figure out, I am posting my bill online ....
So, what's the next killer app on mobile phones ?
Clearly, #1 is voice. Then we've had pictures. That's #2 (if we pass on the ringtone era) What's next ? We are not talking about the 20 million units/quarter or so multimedia smartphones here, but rather the 700 million units/year so-called "feature phones" ... So here is what we have
1. Music and movies (stuck in DRM and channel issues for several years)
2. Digital mobile tv (requires specific and/or 3G cellular networks)
3. Analog mobile tv (cheapo and free-to-air, but short term)
4. Location Based Services, aka LBS (requires GPS)
The cool thing about music and movies is that you can consume even if a network is out of reach, i.e. no connectivity. Handy in particular when in the middle of nowhere (might not happen often these days) or in a plane (that's really my business traveller argument). Mobile TV requires a network (99% of the world is analog) but news, sports and favorite tv shows for free anywhere ? wow now that's cool. But looks like carriers want us to pay for digital mobile tv ... not sure we're ready ... and GPS needs to solve the RFI problems ...
So what do you think ???
Philippe at Telegent Systems
I have recently joined Telegent Systems, a silicon valley company that does mobile tv silicon. I am doing business development here, I think I will soon post updates on my website (www.philippemora.com) and linkedin (http://www.linkedin.com/in/philippemora).
It's very interesting to see that eventhough 99% of television in the world is still analog, but when we mention Mobile TV, we immediately think about digital mobile TV, in particular the Digital Video Broadcast networks ...
So what is new ? I think it would be interesting to focus on understanding what drives customers to viewing a movie, or anything that's audio-visual for that matters, on a very small screen ... It's now not really unusual to see people watching movies on their ipods during long-haul international flights, something I was not seing even two years ago when aPpLe lauched the feature (yeah others had done that before however none sold $1 million in movies the first week.
So now, how long is it going to take to have the mainstream actually *pay* for several interactive TV channels on a phone - which is what all the DVB flavors promise ... Obviously, when this happens, everybody in the food chain will be most happy. I bet for 2010 at the earliest ...
Brilliant: SJ asks to abolish DRM
From Steve Jobs, http://www.apple.com/hotnews/thoughtsonmusic/
Steve Jobs
February 6, 2007
With the stunning global success of Apple’s iPod music player and iTunes online music store, some have called for Apple to “open” the digital rights management (DRM) system that Apple uses to protect its music against theft, so that music purchased from iTunes can be played on digital devices purchased from other companies, and protected music purchased from other online music stores can play on iPods. Let’s examine the current situation and how we got here, then look at three possible alternatives for the future.
To begin, it is useful to remember that all iPods play music that is free of any DRM and encoded in “open” licensable formats such as MP3 and AAC. iPod users can and do acquire their music from many sources, including CDs they own. Music on CDs can be easily imported into the freely-downloadable iTunes jukebox software which runs on both Macs and Windows PCs, and is automatically encoded into the open AAC or MP3 formats without any DRM. This music can be played on iPods or any other music players that play these open formats.
The rub comes from the music Apple sells on its online iTunes Store. Since Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the “big four” music companies: Universal, Sony BMG, Warner and EMI. These four companies control the distribution of over 70% of the world’s music. When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods. Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services. However, a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.
To prevent illegal copies, DRM systems must allow only authorized devices to play the protected music. If a copy of a DRM protected song is posted on the Internet, it should not be able to play on a downloader’s computer or portable music device. To achieve this, a DRM system employs secrets. There is no theory of protecting content other than keeping secrets. In other words, even if one uses the most sophisticated cryptographic locks to protect the actual music, one must still “hide” the keys which unlock the music on the user’s computer or portable music player. No one has ever implemented a DRM system that does not depend on such secrets for its operation.
The problem, of course, is that there are many smart people in the world, some with a lot of time on their hands, who love to discover such secrets and publish a way for everyone to get free (and stolen) music. They are often successful in doing just that, so any company trying to protect content using a DRM must frequently update it with new and harder to discover secrets. It is a cat-and-mouse game. Apple’s DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.
With this background, let’s now explore three different alternatives for the future.
The first alternative is to continue on the current course, with each manufacturer competing freely with their own “top to bottom” proprietary systems for selling, playing and protecting music. It is a very competitive market, with major global companies making large investments to develop new music players and online music stores. Apple, Microsoft and Sony all compete with proprietary systems. Music purchased from Microsoft’s Zune store will only play on Zune players; music purchased from Sony’s Connect store will only play on Sony’s players; and music purchased from Apple’s iTunes store will only play on iPods. This is the current state of affairs in the industry, and customers are being well served with a continuing stream of innovative products and a wide variety of choices.
Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company’s music store. Is this true? Let’s look at the data for iPods and the iTunes store – they are the industry’s most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. It’s hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.
The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company’s players and music stores. On the surface, this seems like a good idea since it might offer customers increased choice now and in the future. And Apple might benefit by charging a small licensing fee for its FairPlay DRM. However, when we look a bit deeper, problems begin to emerge. The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.
An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies. Perhaps this same conclusion contributed to Microsoft’s recent decision to switch their emphasis from an “open” model of licensing their DRM to others to a “closed” model of offering a proprietary music store, proprietary jukebox software and proprietary players.
The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.
Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.
In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.
So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies.
Much of the concern over DRM systems has arisen in European countries. Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free. For Europeans, two and a half of the big four music companies are located right in their backyard. The largest, Universal, is 100% owned by Vivendi, a French company. EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company. Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.
